Mon, Aug 19, 2002 page10

• Chinese farmer cultivates an empire

  • AFP
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  Huang Qiaoling was short more than 29 million yuan (US$3.5 million) of the 30 million yuan he needed to start the tourist and entertainment business he had envisioned.

  So, as with most of China's entrepreneurs, the son of a farmer from China's eastern Zhejiang province was forced to begin by borrowing the start-up capital from friends in 1994.

  Eight years later, from inside the oval office of his million-dollar Washington White House replica in the eastern city of Hangzhou, Huang rules over the Song Dynasty Town Group, a Disneyland-like empire worth 4 billion yuan.

  The self-made entrepreneur is testament to market forces at work in China's fast-changing economy and the growing role of private enterprise in an increasingly affluent and modern nation.

  Official statistics show private firms contributed 27 percent of China's 9.5 trillion yuan (US$1.1 trillion) gross domestic product last year, becoming a major engine of economic growth as well as bringing hope it will relieve the nation's massive joblessness.

  Yet despite the clear paradigm shift in China's centrally dictated economic policies, getting a business of the ground remains a murky process which requires navigating a web of personal and political relationships and deals as complex as they are risky.

  For hopeful entrepreneurs, the avenues to the acquisition of seed capital remain restricted, and those who are fortunate enough to have wealthy family and friends usually turn to them.

  Other than personal favours, to begin a business independently needs approaching another firm with a good business plan or finding one of a handful of the country's venture capital firms, said China Europe International Business School management professor Zhang Weijiong.

  Securing a government-sponsored incubator plan is another way, but that also requires capital.

  Starting a business is very difficult without assets confirmed Huang, 44, whose group is made up of 20 tourist-related businesses in the eastern cities of Hangzhou, Nanjing and Ningbo and northeastern Dalian.

  His own path to super-wealth could barely have begun in a more complex way, and Huang swears he would never choose to launch a business again.

  It started with a 10 million yuan loan from friends. Huang promised to pay back borrowings with accruing annual interest rates of 20 percent.

  He then persuaded a construction company to begin building hundreds of acres of an amusement park that include models of Amsterdam, Venice and ancient China streets without a down payment, promising 20 percent annual interest until the project was completed.

  As building began, Huang insured the project at a value of 20 million yuan. That contractual agreement allowed him to borrow an additional 10 million yuan from banks.

  Finally Huang asked a friend in Hong Kong to deposit 10 million yuan in a local bank and used that deposit as a guarantee on the next 10 million loan.

  Such means were not an option for Shanghai's Yellow Submarine pizza chain co-owner Wu Dingming who sunk all his cash with an American business partner into his first pizza shop in 1994.

  "It was not a big amount of money, but I was lucky that many foreigners came to my restaurant on the first day of business," he said.

  "In China private business has little access to bank loans."

  Ye Enguo, general secretary of the quasi-governmental Shanghai Private Enterprise Association explained that acquiring capital for a new business is an obstacle for many entrepreneurs.

  "Currently, private firms still have problems borrowing money from banks. One reason is because Shanghai has not set up a reliable credit network," he said.
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